Trademaid

Darren Quinn just put out yet another go at the trade story. I thought this was settled years ago. Mosler/MMT is correct.

Steve Keen was “Not Wrong.”

Fadhel Kaboub is still a bit of a dopey post-Keynesian.

Let’s all go to sleep happy tonight in solidarity.

A reader on Darren’s substack wrote:

Total amateur here and what I am reading is that exports are a cost.
Imports are a benefit.
Increasing our costs (exports) or decreasing our benefits results in an overall loss?'

I replied,

🫗 🚰 It is inaccurate the way you read it, or reproduced it. See the words in Darren’s Preface at the end.

Darren’s Preface was accurate, it stated, “Exports are a Rela lo Cost, Imports a Real Benefit.”

But note to MMT crticis, that’s just first order. If you import toxic sludge the it’s not a benefit. naiton do this. New Zealand was importing Peter Theil and other monsters.

On real t erms of trade and soft currency systems, the best short article is still Forstater and Mosler’s

it is not focused on trade, but gives you all the basic tools for analysis of international trade. Why? Because the mainstream nutjobs are always ferful of the exchange rate “going south”. If you understand Forstater and Mosler you’ll never have such baseless fears.

An MMT-101 on Trade

Exports are a REAL COST. Not a monetary cost. The meanings with currency flows are opposite to real goods flows. And the point is that this is asymmetric for human beings. You far prefer the real goods flows. Since you cannot eat a dollar bill for lunch. (Though with sufficient government scorepoints in your bank account you might be able to bribe or threaten someone to give you their lunch without spending a dime.)

The real goods flow opposite to the currency flow. So never repeat that post-Keynesian/New Keynesian attack on MMT. They are lies or ignorance (one or the other).

Exports are NOT a “$” cost. They are a REAL COST, and that makes all the difference.

The MMT point is that In the macro (whole system) the monetary cost is not a worry (it is for a household or firm in the micro), since your domestic economy can always be adjusted so the poorest do not miss out from changes in your real terms of trade (net flow of real goods), or for that matter from a change in the current account trade (intl. “$” flow) or forex rates.

In other words, net importing is not a domestic deindustrialization or unemployment story, it is an increased living standards story. But corrupt or just innocently backwards government policy can turn it into something horrific, like deindustrialization and mass unemployment. You should ask yourself why the governments choose such policy? It’s not a market force.

Steve Keen’s talking point a while back was, “Well i don’t trust the politicians to make the right domestic adjustments.” Sure, he’s right to be distrustful, but this does not help, since the government will 𖥐𖥕𖥐𖢉 things up regardless. Witness Tariffman of recent times. In his old debate with Mosler, Keen was being too pedantic. (In any case, Mosler agreed that you do not want to depend on imports for strategic production that could be generated domestically, even if your domestic produciton in that case was inefficient, e.g., oil/gas and surgical masks to name just a couple of exmaples of a strategic resources.)

Domestic Policy is Critical

You want people to understand the truth, that the domestic adjustments can always be made, so a poorer nation in the global south can net import without it turning into a mass unemployment story or “borrowing from the IMF” story (completely needless and ꕷꖡꖹꘝꕯꕒ). Because then the fault of failure in the domestic economy (i.e., unemployemnt and rising inequality) is clear, and ordinary people can then put presusure on their government to do the right thing, which is only possible when the government no longer has the excuses, (i) “We cannot find our own scorepoints,” or (ii) “But the balance of payments constraint will risk hyperinflation.” Once people know those myths are false, ordinary people can pressure governments to provide full decent quality social services and full employment, without having to go to the private market for cheap & nasty substitutes and expensive healthcare.

Free public healthcare is a REAL COST, not a monetary cost, it’s the oposite of a $ cost. It is a monetary injection into the economy — you could say a $ flow into the foreign sector, where foreign now just means “non-governemnt balance sheets”. But it withdrawls real labour and medical supplies from out of the priavte sector. So the same as the trade story essentially.